Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consorcio Ara SAB de CV (CNRFF, Financial) reported a 2.7% growth in revenues for the second quarter of 2024 compared to the same period in 2023, totaling MXN1.89 billion.
- The company generated positive free cash flow of MXN375.3 million in the second quarter of 2024, maintaining cash and cash equivalents balance unchanged from the close of 2023.
- Affordable entry-level homes saw a significant revenue growth of 14.7% in the second quarter of 2024 compared to the same period in 2023.
- The shopping center division performed well, with revenues growing by 10.6% in the second quarter of 2024 compared to the same period in 2023.
- Consorcio Ara SAB de CV (CNRFF) maintained a strong financial position with a stable cash and cash equivalents balance of MXN2.29 billion as of June 30, 2024.
Negative Points
- Residential revenues decreased by 26.2% in the second quarter of 2024 compared to the same period in 2023, primarily due to lower revenues from developments in Acapulco affected by Hurricane Otis.
- The average price of homes sold in the first half of 2024 was 1.8% lower compared to the same period in 2023.
- Accounts receivable increased by 8.8% as of June 30, 2024, compared to December 31, 2023.
- The net debt to EBITDA ratio, although low, was positive at MXN108.7 million at the close of the second quarter of 2024.
- The residential project Dream Diamante in Acapulco is expected to fully recover only by 2025, indicating a slower recovery pace.
Q & A Highlights
Q: When do you expect Acapulco's housing development to recover to pre-Hurricane Otis levels, and what will drive future revenue growth?
A: Acapulco is recovering well, with affordable and middle-income projects expected to reach pre-hurricane sales levels by this quarter. The residential project, Dream Diamante, is at 50% of previous sales and should fully recover by 2025. Future revenue growth will be driven by a mix of increased unit sales and higher average prices.
Q: Can we expect sustainable growth in earnings, and how is free cash flow calculated?
A: We anticipate higher revenues and stable margins in the second half of the year, with increased free cash flow generation. Free cash flow is calculated using cash flows from operations and investments.
Q: Could you provide more details on pricing dynamics in the lower-income segment and land acquisitions in Baja California?
A: The price increase in the affordable entry-level segment is due to successful projects in Tijuana, the State of Mexico, and Cancun. We acquired land in Tijuana, which will support continued growth in this segment.
Q: How might the new administration impact the affordable segment, and is industrial real estate development still being considered?
A: We do not expect new subsidies from the new administration, but Infonavit's Line III program is beneficial for the affordable segment. We are planning to create a new division for industrial real estate development, recognizing its market potential.
Q: What are the expectations for revenue and margin growth in the second half of the year?
A: We expect higher revenues and stable margins in the second half, with a focus on selling more units and increasing average prices.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
